Age can only be a number. But there is a renewed interest in the wisdom of people who have lived long and have experienced some economic and other crises.
The Queen’s irrepressible spirit has much to teach us in this platinum anniversary year. Lessons also need to be learned from that other intrepid 90-year-old—US investment guru Warren Buffett.
If you’re navigating this turbulent time in the stock markets, the views of this 91-year-old, who has been at the forefront of his career for more than half a century, are more relevant than ever.
The S&P 500 index is down 19 percent this year, its decline compounded by this week’s panic selling. But shares of Berkshire Hathaway, the $639 billion (£516 billion) investment vehicle acquired by Buffett in 1964, are up nearly 0.4 percent.
That’s thanks to excitement over the way Buffett, aka the Saga of Omaha, is using the fund’s $106 billion (£85 billion) cash pile amid the market crisis.
He’s capitalizing on what he sees as an opportunity with a tried-and-true system that has yielded compound annual growth of 20.1 percent since 1964, compared to 10.5 percent for the S&P.
His founding principles include buying when others are fearful and choosing quality stocks whose intrinsic value isn’t reflected in their price. This investing style is back in vogue as higher interest rates derail tech and other growth stocks.
Berkshire Hathaway has interests in 90 companies, including banks, insurance companies and railroads. Apple is the largest turnout at 38 percent, showing how Buffett and his team are recalibrating the system for this decade and beyond.
This team consists of an ensemble of younger executives, most notably Todd Combs and Ted Weschler, the heirs to Buffett’s crown. But another 90-year-old stars in a leading role – Charlie Munger, 98, the wise man’s best friend.
The fund is said to have started buying apples when Buffett took note of a friend’s grief over the loss of his iPhone and concluded that it was a must-have product for the consumer — much like the products of Kraft Heinz and Coca-Cola, two other core holdings.
A “wide moat” protects these companies from competitors, gives them pricing power and shields profits.
At least 20 books explain the tenets of Buffett’s philosophy, including his anti-inflation advice that “cheats almost everyone.” You should excel at your job – and support “wonderful” companies whose goods and services are in demand. For the past few weeks, Berkshire Hathaway has been tracking such companies, it detailed Tuesday.
The list of purchases includes insurer Alleghany for $11.6 billion (£9.3 billion) and shares in Activision Blizzard, the Call of Duty video games group that is the subject of a bid from Microsoft. Stocks in Citigroup, Paramount Global, PC maker HP, and oil companies Chevron and Occidental are other buys in Buffett’s latest buying spree.
But even now he doesn’t seem to be making a quick buck. As Tracey Zhao, senior funds analyst at Interactive Investor, puts it, “Buffett’s preferred holding period is perpetuity.”
It’s a credo that has made Buffett a fortune of $113 billion (£90.5 billion) and garnered a following of mass investors, many of whom have become millionaires. However, the current cost of taking up the movement is prohibitive: a single share cost £369,000 this week. The B shares, with fewer voting rights, cost a modest £245.
If, like Buffett, you view current U.S. market conditions as an opportunity to make money, consider adding some of his recent purchases to your portfolio even as more storms loom. If that seems like too much hassle, the a-shares make up 4.8 percent of the CFP SDL Buffettology fund, which is run by Keith Ashworth-Lord (no relative), who follows the principles of the sage, including his watch-and- wait strategy. Ashworth-Lord says, “Buffett has considered buying Alleghany for more than 60 years.”
Over five years, it has returned 27.4 percent, versus 14.4 percent for the all-company sector. But lately it has been hit by the maneuvers of private equity groups for whom patience is no virtue.
Ashworth-Lord says, “They want to attract companies that can offer rich future rewards to shareholders at a great price. For example, Homeserve, in which we have an interest, is in talks with Canada’s Brookfield infrastructure and other private equity groups may be circling other holdings.’
Buffett isn’t a fan of private equity — or most fund managers.
He recommends investors looking to diversify buy a low-cost “passive” index fund. interactive investor’s recommends the Vanguard Us Equity fund.
That’s a gamble. But Buffett, a firm believer in US entrepreneurship and ingenuity, preaches that “never bet against America.” Shareholders who backed him would agree.
Since 1990, Berkshire Hathaway’s stock price has increased 6,392 percent.
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